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ECB says bank health test to strengthen confidence

The euro sign landmark is seen at the headquarters (R) of the European Central Bank (ECB) in Frankfurt September 2, 2013. REUTERS/Kai Pfaffe
The euro sign landmark is seen at the headquarters (R) of the European Central Bank (ECB) in Frankfurt September 2, 2013. REUTERS/Kai Pfaffe

FRANKFURT (Reuters) - The European Central Bank vowed on Wednesday to submit the euro zone's top banks to a comprehensive batch of tests next year, staking its credibility on a review that is crucial to rebuilding confidence in the sector.

Setting out its plans to scrutinize 128 top euro zone lenders, the ECB said the exercise aimed to improve transparency in the sector, to identify and implement "corrective action" where needed and to build confidence in banks.

"A single comprehensive assessment, uniformly applied to all significant banks, accounting for about 85 percent of the euro area banking system, is an important step forward for Europe and for the future of the euro area economy," ECB President Mario Draghi said in a statement.

"Transparency will be its primary objective," he said. "We expect that this assessment will strengthen private sector confidence in the soundness of euro area banks and in the quality of their balance sheets."

The ECB said it would conclude its assessment in October 2014, before assuming its new supervisory tasks in November 2014. If capital shortfalls are identified, banks will be required to make up for them, the ECB said.

"For the success of the exercise, the ex ante availability of backstops is critical," it added.

(Writing by Paul Carrel, editing by Mike Peacock)

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